New Jersey Healthcare ADR Lawyer & Attorney : Healthcare Neutral : Richard Webb : New York Metropolitan Area

         

 

          Yesterday's Wall Street Journal Health Blog had a post by Jacob Goldstein on the potential struggle brewing between primary care physicians and specialist physicians over the need to free up more money for primary care -  a widely accepted element of necessary healthcare reform.  Earlier that day, the American College of Physicians called for more federal funding for primary care, not through "budget neutral" adjustments in the Medicare physician fee schedule (i.e., by reducing payments to specialists), but simply by paying more upfront for primary care.  The WSJ Health Blog interpreted the primary care position paper this way:

"Congress could try to pay primary care docs more by cutting Medicare payments to some of the rich specialists.  But the rich specialists would fight that tooth and nail, and nothing would ever get done."

          Reading this, I couldn't help but recall a time in my former life when I heard a newly proposed law firm partnership compensation system described by one of its proponents this way: "It will work well because some partners will make more, and everyone else will make about the same."  Regrettably, law firm profits are a zero sum game.  There may be enough "stimulus" mania (i.e. printing of money) in Washington these days to save the primary care docs and the specialists from a zero sum fate, but probably not for very long.

          More than two months ago, this primary v. specialist conflict was predicted and thoroughly dissected by Maggie Mahar and Niko Karvounis in The Health Care Blog, where they dubbed it the "Spread the Wealth Controversy."  In the end, they concluded that money alone would not be the answer to the problem:

"Ultimately, we will probably need to grapple with primary care as a cultural issue within the medical community....in medical schools, students are sometimes looked down upon for choosing to specialize in cognitive care.  Further, research has shown that the medical school curriculum actually drains students of empathy, which may contribute to de-valuing communicative, interpersonal care....The bottom line is that we need to take a multi-faceted approach to the primary care crisis."

          For a more provacative treatment of the need for systemic reform of primary care, see "Mythology and Healthcare Reform" by Monte Uyemura, M.D., also in The Health Care Blog.  Better yet, just subscribe to The Health Care Blog - its a great read on all matters concerning the health care system.

          I have friends and colleagues on both sides of this primary v. specialist conflict.  Most of them don't see it as their conflict at all, and find it unpleasant to talk about.  Unfortunately, it won't likely go away.

[Image: "Artwork" with 20 Dollar bills]

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       I recently learned that Betsy Ryan, the President and CEO of the New Jersey Hospital Association, has started a blog called "Healthcare Matters."  It appears as part of the New Jersey Hospital Association's public website. 

"Healthcare Matters eamines the many issues confronting New Jersey's hospitals and their patients. Readers are encouraged to join the discussion, because healthcare matters- to all of us."

       For those not familiar with Betsy Ryan, she was recently appointed to the NJHA's top management post after years of service as the organization's Chief Operating Officer and General Counsel.  She has extensive experience in the legislative, regulatory, financial and operational issues facing New Jersey's hospitals.  As a result, her blog is well positioned to address a subject not currently covered directly in the blogosphere.

       So far, Healthcare Matters has captured some of Betsy's personal perspectives on current events affecting New Jersey's hospitals.  She has already attracted some lively discussion.  Subscription by RSS is easily done, and I encourage all to join in and expand this dialogue.

[Image: welcome kitty, by Portraitlady4306, August 27, 2007] 

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     Before you head off for the long Thanksgiving weekend, consider signing up for a teleconference to be held next Tuesday that you might otherwise miss in the post holiday crush.  The American Health Lawyers Association ("AHLA"), through its ADR Task Force, is offering "A Practical Toolkit for Managing Healthcare Conflict" from 3:00 to 4:00 p.m. Eastern Time on December 2, 2008.  You can read the full description of the program and sign up on the AHLA's website.  It is open to AHLA members and non-members.

      Presumably, the teleconference will be based on the "Practical Toolkit for Managing Healthcare Conflict" just published by the AHLA, which is available as a PDF on the AHLA website.  This document is a good summary of the need for conflict management in the healthcare (particularly hospital) setting, and provides a framework for hospital management to approach conflict management comprehensively.  It also addresses the specific requirements for internal hospital conflict resolution processes mandated by the Joint Commission.

       

     No doubt the current economic crisis affecting hospitals in New Jersey and throughout the country  will only make conflict more prevalent and important to manage.  It will be interesting to see whether some of the suggestions made in the AHLA's toolkit, which will carry a new and significant price tag, will gain traction.  I believe what they say about "an ounce of prevention" applies here, but those with the checkbooks may need more convincing. 

     Joining in to hear this program would be a step in the right direction.

 

[Image: A toolbox, by Per Erik Standberg, May 13, 2006] 

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     I've written here previously about the need for all constituents at a financially challenged hospital to collaborate towards a mutually positive solution, and to seize the moment of opportunity that arises once it is clear that the status quo cannot be sustained.  Waiting for a financially strapped state government like New Jersey's for help may result in others seizing control, but will not likely fix the underlying problems.

     It was great to read last week that Raritan Bay Medical Center, a two hospital system with an older and larger facility in Perth Amboy and a newer, smaller complex in suburban Old Bridge, was planning to meet with potential buyers of the Old Bridge facility to secure a cash infusion for the struggling Perth Amboy hospital.  I was born in Perth Amboy Hospital in 1953.  No, this is not me below, but the scene probably looked much like this back then.

     Writing in the Star Ledger online edition, Tom Haydon reports that employees at the two hospitals were informed of the possible sale last month, and that local and state political figures were fully behind the move.  The sale would consolidate Raritan Bay's operations at the Perth Amboy facility, where Raritan Bay serves a large number of uninsured patients, while permitting the Old Bridge facility to continue operating with minimal disruption to its employees and community. 

     It remains to be seen whether the proposed sale will occur and have a lasting corrective effect on Raritan Bay's financial challenges.  However, it is refreshing and encouraging to see the governing board and management of a hospital having the foresight and will to act, while they still have options, to remain true to their view of their hospital's mission.

[Image: Two nurses with baby in nursery, Toronto, Ontario, circa 1955, by Canadian Nurses Assoc.]

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 [Image: U.S. Hygiene Laboratory photo of Schick test, a measure of immunity from diphtheria, 1915]


          It may be the weather, the economy, or the mounting pressure on hospitals and physicians to "compete" with each other like never before, but lately I have noticed a sharp increase in matters presented to me involving "professional review activities" by hospitals against physicians on their medical staffs.  These disputes come in all shapes and sizes, but always require reference to the hospital's medical staff bylaws and applicable law. 

          In particular, the federal Health Care Quality Improvement Act of 1986 ("HCQIA") provides for "safe harbor" procedures to be followed in the course of any professional review activity, compliance with which is a precondition to the legal immunities offered by the Act.  The HCQIA's requirements have become the industry standard, and often shape (or at least must be read together with) the provisions of a hospital's medical staff bylaws concerning the due process rights of affected practitioners.

          In 2004, a jury in the Northern District of Texas awarded a physician $366 million in damages against a hospital and members of its medical staff for action taken by them to suspend the plaintiff physician's medical staff privileges.  The award in that case, Poliner v. Texas Health Systems, et al, sent shivers through hospitals throughout the country because the trial court  permitted the damages award to stand (albeit substantially reduced in amount on remittitur), notwithstanding the defendants' claim of immunity under the HCQIA.  This week, the Fifth Circuit Court of Appeals issued a decision in the defendants' appeal on this issue, and reversed the judgment of the District Court.

          The Court's opinion focused on whether the defendants in Poliner had adhered to the four requirements for immunity under the HCQIA:

1 - Were their actions taken in the reasonable belief that they furthered quality health care?

2-  Was there a reasonable effort to obtain the facts?

3-  Were adequate notice and hearing procedures afforded to the affected physician?

4-  Did they reasonably believe that their adverse action was warranted by the facts known?

          There was no dispute that these were the requirements for immunity under the HCQIA.   The  question faced by the  Fifth Circuit was whether the District Court had interpreted these requirements correctly in applying them to the defendants in Poliner.  In several important respects, the Fifth Circuit found that the District Court had erred.

          Of most importance  to hospitals and counsel for physicians on both sides of these situations, the Fifth Circuit held:

 - The HCQIA's reasonableness requirements were intended to create an objective standard of performance rather than a subjective good faith standard.

- The Court's review of the reasonableness of the defendants' decisions must be based on the information known to them at the time, and not what might be later shown to be true by experts or otherwise.

- Immunity does not require the defendants to have been correct or "right" in their findings, only that their findings were objectively reasonable under the facts available at the time.

- Plaintiff's allegations of anti-competitive motives and evil intent are of no consequence to the immunity offered by the HCQIA if the defendants' actions are objectively reasonable.

- Immunity from money damages under the HCQIA does not require compliance with the hospital's medical staff bylaws, as long the four requirements of the HCQIA set forth above have been met.

          This decision will greatly affect the resolution of conflicts involving professional review action, whether during the hospital-medical staff proceedings or in subsequent litigation.  The trial court's decision created a perception of risk in many professional review scenarios that expanded the range of potential outcomes "on the table" during any effort to resolve these matters.  Under the Fifth Circuit's decision, that range has been shrunk.

          Aside from its  value as direct precedent, the decision is very clear, well reasoned and practical in its approach, and I wager it will be widely followed.  Affected physicians will now get far less impact from suggestions that "the review panel was out to get me," "my expert knows more about this than you do," or  "the hospital didn't follow its bylaws."

           Poliner appears to have put the balance of negotiating power back to where it was intended by the HCQIA.  It clearly elevates considerations of patient safety over the right of an affected physician to seek money damages.  It leaves unchanged the affected physician's right to seek remedies other than money damages (e.g., to enforce rights under the medical staff bylaws), and holds hospitals and medical staffs to a reasonable standard of conduct that they can realistically implement.  It warrants their collective sigh of relief.

(Hat tip to the Horty Springer Health Law Express (join here) for being the first to bring this decision to my attention.)

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          I just read an excellent post by Jeff Goldsmith in The Health Care Blog entitled "Health care is not recession proof." In it, he debunks the "conventional wisdom" that health care is "recession proof" because "people get sick regardless of economic cycles, and the publicly funded safety net programs insure that people who need care get it."

          I will not attempt to restate his entire argument (or some of the interesting comments of others), but I can't help but notice the coincidence of his central theory with current events here in New Jersey. As he explains it,

          "[t]he reality is that health care has never been recession proof. It is simply that the system is so immense that lag effects in changed health care payment conceal the cyclicality. Recessions shrink tax revenue growth, and since Medicare and Medicaid are the balancing items in state and federal budgets, Medicaid and Medicare constrict payments a predictable 18-24 months after revenue problems surface."
         

[Image: Maximum recession of tsunami waters at Kata Noi Beach, Phuket, Thailand, before the third, and strongest tsunami wave, by User: PHG, December 26, 2004 ]
         
         
          Goldsmith's post appeared shortly before the New Jersey legislature's apparent resolution of the State's July 1 fiscal year budget, in which New Jersey's hospitals collectively will receive about $111 million less in charity care funding to cover their statutorily mandated service to all patients regardless of ability to pay, a mandate that already left hospitals well short of covering their costs at the former funding level. Thus, in New Jersey, hospitals get not only the cyclical effect of lower Medicare and Medicaid payments described by Goldsmith, but a decrease in charity care payments that is similarly driven by the State's budgetary shortfalls unrelated to healthcare.

          As Goldsmith says to the healthcare industry in closing, "Welcome to the real world!"  Better yet, for those running this state's beleaguered hospitals, "Welcome to New Jersey!"

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          The current issue of in Re: Magazine, the special supplement to the weekly newspaper, New Jersey Lawyer, is dedicated to healthcare law and is online now.

        

          In addition to an article by yours truly entitled Alternative Dispute Resolution In The Healthcare Industry, topics covered include:

- Nuances Of Purchasing  A Medical Practice, by Peter A. Greenbaum;

- The Next Wave Of Healthcare Fraud Enforcement In New Jersey, by Mark S. Olinsky and Gary W. Herschman;

- Answering Malpractice Insurance Questionnaires, by Christopher R. Barbrack;

- Medicaid Beneficiaries' Rights Not To be Evicted From Nursing Homes, by William P. Isele; and,

- New IRS Form 990 And Transparency For Nonprofit Boards, by Todd C. Brower and Isai Senthil.

[Image: Newspaper Rock, by Jon Sullivan, February 15, 2004]

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   [Image: Engraving of Gilbert  and Sullivan's Trial by Jury, from Illustrated Sporting and Dramatic News, by D. H. Friston, May 1, 1875.]


          Recently I wrote about the risk of an "intuitive decision" associated with placing the resolution of a dispute in the hands of a judge.  As I was writing that post, I came across reports of a case recently decided in West Virginia that should get the attention of every hospital involved in a medical staff dispute that could end up before a jury.  As mentioned in West Virginia Business Litigation by Jeffrey V. Mehalic, Hamrick v. Charleston Area Medical Center ("CAMC") was a suit filed by a surgeon against a West Virginia hospital alleging misconduct and damage to his reputation resulting from the revocation of his medical staff privileges.  The case was covered by Eric Eyre of the Charleston Gazette at the start and end of the trial.

          CAMC revoked Dr. Hamrick's privileges when he failed to obtain a required medical malpractice insurance policy, which Dr. Hamrick insisted was not necessary as long as he maintained an adequate self-insurance fund.  That issue led to separate proceedings about the  adequacy of physician self-insurance under West Virginia law, in which Dr. Hamrick prevailed, and ultimately inspired state legislation permitting physicians to rely upon self-insurance.  In the meantime, Dr. Hamrick pursued his suit against CAMC for damages and immediately obtained an injunction reinstating his privileges, thus permitting him to continue in practice at CAMC during the litigation.

          So, notwithstanding that Dr. Hamrick had established his right to self-insure in court, that the West Virginia legislature had enacted a statute permitting self-insurance of the kind maintained by Dr. Hamrick, and that Dr. Hamrick's practice at CAMC was never interrupted, what did the jury do at the conclusion of the trial?  They returned a $25 million verdict for Dr. Hamrick.

          I know only what I read in the press about this case, but it appears some facts were brought out at trial that caused the jury to conclude that CAMC management had been less than forthright in their handling of the insurance dispute with Dr. Hamrick.  Charleston attorney Scott Segal, who represented Dr. Hamrick in the case, described some of these facts in a letter to the editor of the Charleston Gazette.  On the other hand, counsel for CAMC, Bob O'Neill, told the jury that "CAMC had acted reasonably and in good faith...they bent over backward," efforts which apparently included an offer to purchase a temporary commercial insurance plan for Dr. Hamrick until the matter was resolved.

          Perhaps the best insight into the jury's decision comes from Karen Miller, Dr. Hamrick's sister and lawyer, who was quoted after the verdict in the Charleston Gazette as saying, "We need new administrators over there, and we need a new Board of Trustees.  That's what the jury is telling the community, just like the doctor's [sic] have been."  Apparently there has been some dissatisfaction within the community served by CAMC in recent years concerning the performance of its leadership.  But was it the job of the jury in this case to address that dissatisfaction, or to take action that would lead to a change in CAMC's leadership? No matter what facts came out at trial, it is difficult to see how Dr. Hamrick could have established anything more than nominal damages, let alone $5 million in compensatory damages.  The $20 million punitive damages award seems to have been aimed solely at getting rid of CAMC's Board and management - even though the community will ultimately bear this cost.  Perhaps an appeal will turn things around, but I understand that West Virgina offers no appeal of right, so the state's Supreme Court must first agree to take the case.

          What's the moral of the story?  Hospitals locked in a dispute with a physician that may end up being decided by a jury must take into account the uncertainty of the jury's reasoning process, and the certainty that the jury will not be made up of hospital administrators or health care lawyers.  Even when a hospital is sure it is  "in the right", it may end up with a very bad result.  My guess is the case didn't settle because CAMC believed (1) that it was "right," and (2) that Dr. Hamrick's last settlement demand was higher than CAMC's risk of a bad jury verdict.  Whether CAMC was "right" or "wrong" didn't matter.  Getting hospitals to understand this, and helping them to correctly assess the  competing risks, are the mediator's bread and butter.

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          [Image: Hospital Corpsman sutures a patient's hand.  Photo by Dexter Roberts, May 31, 2005]



          I recently wrote here that the Report of the New Jersey Commission On Rationalizing Health Care Resources (the "Reinhardt Commission Report") suggested three areas for collaboration between hospitals and their medical staffs that would be challenging, but worthy of pursuit.  Among them, the need to develop a mutually acceptable and enforceable program of Emergency Department coverage, jumped off the pages of the AHLA Health and Life Sciences Law Daily (members only) today in the form of an article by Ann Wlazelek in The Morning Call.  The story, "Doctors' stance leaves hospital shorthanded," tells the tale of a failed negotiation between management at Lehigh Valley Hospital and a group of specially trained hand surgeons to continue the surgeons' on-call coverage at the Hospital's Cedar Crest emergency room in Allentown, Pennsylvania.
          The Reinhardt Commission Report  (at pages  125-126) offers a concise explanation of the problem: hospitals by law must provide around the clock care in their emergency departments that includes a variety of specialized physicians' services, while the obligation of members of their medical staffs to provide those services is limited, unclear and difficult to enforce.  Most of the potential fixes for this problem suggested by the Report are outside the power of any one hospital to accomplish (e.g., standardized regulatory mandates for physician coverage,  increased Medicaid payments to physicians, regional coordination of services into Centers of Excellence).  The clear message in this portion of the Report is that each hospital faces unique circumstances, and must find its own way to solve the on-call problem.
          I don't know anything about the situation of the Lehigh Vally Hospital hand surgeons other than what I read in The Morning Call.   What I can tell is that each of the parties has adopted and stated a position that it will not relinquish.  The Hospital's position is that it must be able to determine the nature and scope of the services it will offer in its emergency department,  and that members of the Hospital's medical staff must provide all necessary on-call services as a condition of their staff membership. The hand surgeons' position is that they should not have to provide on-call services to patients from a great distance away who could have been treated by other qualified surgeons in their own area.
          Although these positions appear to be irreconcilable, I wonder if the parties have explored and shared their respective interests.  The Hospital's interests might include:
1- securing necessary medical expertise in the emergency department 24/7/365;
2- retaining the ability to determine the nature and scope of the services it will offer;
3- maintaining a medical staff rule for on-call coverage that is fair, reasonable and perceived as such; and
4- operating cost effectively. 
          The interests of the hand surgeons might include:
1- limiting their on-call coverage to patients who truly require their expertise; 
2- preserving the scheduling integrity of their regular office and surgical practice;  and
3- defining an on-call coverage obligation that is equitable when compared with other members of the medical staff. 
          I doubt that either party would object to the other's statement or attainment of their respective interests.  Might it then be possible for all or most of these interests to be accommodated within a comprehensive solution to the parties' on-call coverage problem?  I think it would.  I suspect this has not happened because the parties have not attempted to do it.  Instead, the hand surgeons are off the medical staff and the Hospital is about to spend a lot of money to recruit a hand surgeon who cannot possibly cover the emergency department 24/7/365.  Everybody loses.
          Hospitals in New Jersey and elsewhere can reach a better result if they work with their medical staffs to fashion solutions that address not their stated positions on this issue, but their respective, legitimate interests.  A mediated process of collaboration can create opportunities that otherwise will be missed.

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     A decision by the Appellate Division of the Superior Court of New Jersey last week will raise more questions than it answered in malpractice cases involving hospital based physicians.  In Cordero v. Christ Hospital, covered by the New Jersey Lawyer here, the Court considered whether a Hospital could be held vicariously liable for the malpractice of a member of the anesthesiology group having an independent contractor relationship with that Hospital. The Court held that:

          "...when a hospital provides a doctor for a patient and the totality of the circumstances created by the hospital's action and inaction would lead a patient to reasonably believe the doctor's care is rendered in behalf of the hospital, the hospital has held out that doctor as its agent.  We also hold that when a hospital patient accepts a doctor's care under such circumstances, the patient's acceptance in the reasonable belief the doctor is rendering treatment in behalf of the hospital may be presumed unless rebutted."

     In delineating "the relevant circumstances that should be considered in their totality in determining whether the hospital's conduct would lead a patient in the same situation to reasonably believe that the doctor acts on the hospital's behalf," the Court pointed to the following:

• whether the hospital supplied the doctor
• whether the medical care provided is integral to the medical treatment received in the hospital
• any notice of the doctor's independence from the hospital
• the patient's opportunity to reject the care or select a different doctor
• the patient's contacts with the doctor before the incident in question, and
• any special knowledge of the doctor's contractual arrangement with the hospital

     Applying these criteria to most hospital based physicians who provide services as independent contractors under an exclusive group contract (e.g., anesthesiologists, radiologists, pathologists, emergency medicine), the predominant model nationwide, few would escape characterization as acting "in behalf of the hospital."

     The Court's opinion disregards the reality of current hospital operations.  For reasons of efficiency and patient safety, hospitals have established exclusive independent contractor relationships with groups of specialists in key areas that are integral to the effective operation of the hospital.  Such arrangements have been approved consistently by state and federal courts in the context of unfair competition and antitrust lawsuits.  Without such exclusive arrangements, key services would be provided by a disjointed and unreliable collection of separate physicians - a result that would no doubt lead to another decision holding a hospital liable for failure to implement a safer system! 

     The Court's opinion also falsely assumes that hospitalized patients might make a different decision (i.e., that they might decline treatment) if they understood that hospital based physicians were "independent" from the hospital.  Clearly, they would not, and there would be no reason for them to do so.  The idea that patients accept the services of contracted hospital based physicians only because they believe the physicians are "provided in behalf of the hospital" is a fiction. 

     Assuming hospitals will not abandon the current model of exclusive contracts with hospital based groups, compliance with the Court's opinion will be difficult.  However, unless and until this opinion is reversed, hospitals in New Jersey would be well advised to implement measures which at least nominally address some of the factors identified by the Court.  Admission forms should be reviewed to emphasize the independence of all non-employee physicians, including the hospital based specialists (and disclaiming hospital liability for their acts); patients also could receive a standard notice whenever they are likely to utilize a hospital based physician advising the patient of the independent contractor relationship.  All of this will add expense and paperwork, and will likely have no effect on the patients' decisions or their care, but may save the hospital from significant liability exposure.

     The settlement of malpractice cases in New Jersey involving hospital based physicians will now be more difficult.  Greater risk has been created that hospitals will be held responsible for the acts of heretofore "independent" physicians.  All of the elements identified by the Court in Cordero v. Christ Hospital will take on new significance.  Hospital statutory immunities and insurance coverage issues undoubtedly will require clarification in this regard as well.  The mediator's job just got more interesting. 

 

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          [Image: US Navy Commander Robert S. Kerno, Commanding Officer, USS Yorktown, points out some sights to the President of Venezuela, Hugo Chavez, on a tour of the ship during the 43rd annual UNITAS exercise, March 2, 2002.]


          I wrote here last week that the recently released Report of the New Jersey Commission On Rationalizing Health Care Resources (the "Reinhardt Commission") contained a cogent analysis of the unique relationship between hospitals and physicians.  The Report makes a series of recommendations for the improvement of hospital finances, operating efficiency and patient care that are worthy of pursuit.  However, underlying several of those key recommendations is the need for collaboration between hospitals and the members of their medical staffs - collaboration of a kind rarely seen before now.
          In posts to follow, I will focus on what I see as three key areas in which any hospital and its medical staff can translate the Commission's recommendations into concrete results: 1- establishing joint hospital-physician accountability for adherence to evidence based practice guidelines; 2- developing a mutually acceptable and enforceable program of Emergency Department coverage; and 3- creating a feasible plan to improve the efficient use of hospital resources through changes in scheduling, deployment of professional resources, staffing of intensive care services and management of the continuum of care.
          Before any of these tasks can be addressed successfully, hospitals must decide that these are goals worthy of a significant effort.  Such an effort will likely require formation of a special Board level committee, with management staff, to be charged with development of a plan and the task of integrating the input of the medical staff.  That process of integration will vary from hospital to hospital based on the existing relationship and history, but will require careful attention in every case. 
          Although in most instances the hospital's pursuit of these goals will not immediately place it in a "conflict" or "dispute" with its medical staff, the potential for that result is high.  Moreover, the nature of the issues that must be placed on the agenda can create perceptions and reactions that, once formed, are difficult to undo.  The involvement of a neutral, third party in the design and facilitation of the collaboration process can often obviate or ameliorate these problems.  Agreement between a hospital and its medical staff on the selection of such a neutral may well be the best first step of their journey.

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     [Image: 2005 Texas Longhorn football team playing the University of Colorado, by Johntex 2005]



          The New Jersey Commission On Rationalizing Health Care Resources (a/k/a the "Reinhardt Commission") issued its long awaited Final Report 2008 last week, and was immediately met with a strong response from the New Jersey Hospital Association. In a press release, and more thoroughly in an "Initial Response" distributed to its members, the NJHA praised the Commission's Report "for effort" but found "it falls short in addressing the most fundamental problem confronting our state's hospitals: inadequate reimbursement, especially from governmental payers. The Commission's recommendations provide some steps for stopgap or incremental relief, but New Jersey's healthcare crisis is beyond the point of incremental action."
           It is hard to argue with the NJHA's point that  the reimbursement to its member hospitals by governmental payers (Medicare, Medicaid and Charity Care) is woefully less than the cost of providing that care, and that this problem is at the root of the system-wide financial crisis in the state. Perhaps the Reinhardt Commission's Report could have said this more clearly, or more forcefully.
          But I did not read the rest of the Report to suggest only "some steps for stopgap or incremental relief".  Instead, I think the Report took a realistic approach to solving the big problems by recommending a variety of significant but generally feasible changes in the way hospitals do business. Yes, hospitals need, deserve and in some cases must have more governmental funding to continue their missions. But the idea that all of the hospitals' financial problems can and will be solved only by somebody in Trenton or Washington writing a big check distracts from what the Report says hospitals must and can do to help themselves.
          In short, and in the spirit of the big game this Sunday, the Reinhardt Commission Report essentially urges New Jersey hospitals to focus on their "blocking and tackling", those elements of the game that don't get the media attention or the big money endorsements, but tend to separate the winners from the losers. In particular, the Report contains a thorough and insightful analysis of the relationship of hospitals and physicians, with recommendations for improvement that could have a major, positive impact on the financial performance of most hospitals. I think that's something worth talking about, and I plan to do so in some posts to follow.
          In the meantime, Go Giants!

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          [Image: Auctioneer and assistants, Cheviot, Ohio, 2004, by Rick Dikeman]
     

         Less than three months ago, I wrote here (with reference to Boston's Carney Hospital) about the need for financially distressed hospitals to involve all stakeholders in a collaborative process in order to achieve the best overall result.  Now I see that two New Jersey hospitals have long since passed that moment of opportunity and find themselves up for auction in bankruptcy proceedings.  Yesterday, The Record reported that auctions were set for Pascack Valley and Barnert Hospitals.  Today, reports indicate that Barnert's fate awaits the outcome of further creditors' wrangling in the Bankruptcy Court, while one of the bidders for Pascack Valley  is seeking to delay the auction of that facility scheduled for February 4.
          It is hard to imagine that any of the "stakeholders" involved in the early days of a financially distressed hospital scenario would purposefully choose to resolve their common problem by way of an auction sale in Bankruptcy Court.  Such proceedings are intended and designed to yield the best result for the hospital's creditors.  Although the interests of other constituencies (the hospital's Board, employees, medical staff, patients and community) may be brought into play, the creditors (and more precisely, certain creditors) are driving the bus.  This is not inappropriate given the underlying purpose of the Bankruptcy Code to fairly allocate the debtor's assets among its creditors.  But it makes no sense for these other constituencies to get on this bus if they have any choice in the matter.
          They often do have that choice, but fail to seize the opportunity.  It occurs well before the "B" word is first openly discussed, but when leadership of the hospital knows (or should know) that the status quo cannot be maintained.  Once that moment passes, the options available to the stakeholders begin to diminish, little by little, until one day there is no choice but to close the doors and hold an auction.
          The recently released Final Report 2008 of the New Jersey Commission on Rationalizing Health Care Resources (a/k/a the "Reinhardt Commission Report") addressed this problem to some extent by recommending (at Chapter 15, page 181) that state regulators create an "Early Warning System" to monitor and detect negative financial trends, and "to intervene at the level of hospital governance and management in a graduated fashion based on severity of financial problems and responsiveness of management."  Although a laudable effort, my guess is that this process will in many cases come too late, and when it does, will put state regulators in the driver's seat. 
          The hospital's stakeholders need to do better.  They can, but only through exercise of  leadership that acknowledges the realities of the hospital's predicament, and moves beyond pointing fingers and posturing into a collaborative process to find a solution.

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         [Image: Omaha jazz great Lewis "Luigi" Waites plays the vibraphone during a tribute to Duke Ellington, July 29, 1999, Photo by Jim Williams, for "Joselyn Art Museum: Jazz on the Green," a Nebraska Local Legacies project]




         I just heard from Debra Gerardi, Chair of the Program on Healthcare Collaboration and Conflict Resolution at the Werner Institute for Negotiation and Dispute Resolution at Creighton University.  Debra alerted me to an upcoming program at the Werner Institute that should be considered by anyone interested in healthcare dispute resolution.  Creating Cultures of Engagement in Health Care - International Conference and Dialogue: New Models for Addressing Conflict, Disruption and Avoidance in Health Care, will be held at Creighton in Omaha on June 3-5, 2008.

        As stated in the program description on the Werner Institute's website, the purpose of the conference is to provide participants with an opportunity to:

1. Learn how to apply principles and practices from the field of dispute resolution to upcoming mandates for change including the new 2009 JCAHO leadership standards related to disruptive behavior and conflict management;
2. Learn the principles guiding conflict resolution practice in health care including the essential components for conflict management training programs;
3. Working with experts in health care mediation, negotiation and collaborative law, create an action plan for advancing the outcomes of the conference dialogues and create an ongoing community of experts.

       A description of the Conference's Premises makes it clear that the Werner Institute is on the mark with this program in matching a discussion of conflict resolution theory with an examination of the current culture of healthcare delivery.  And you can check out Luigi while you're there.

       Thanks again, Debra! 

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[This post is taken from my longer article, "Economic Credentialing -  Hospitals and Physicians at the Crossroads", appearing in the New Jersey Lawyer Magazine, February 2007.]  

          "Economic credentialing"  generally refers to any hospital policy of limiting membership on its medical staff, or the right to exercise certain clinical privileges,  to those physicians who have demonstrated patterns of practice in keeping with announced economic parameters.   Implementation of a successful program of economic credentialing will be more likely if it includes the following components:

1. development of a persuasive financial analysis to demonstrate the necessity of the desired changes in physicians' behavior;
2. solid medical support for the safety and efficacy of the desired behavior required by the rules;
3. an outlier provision to recognize extraordinary cases that fall outside the normal range of circumstances that justify the rules;
4. an enforcement mechanism based upon a percentage of compliance that can start at the current mean and adjust to the optimal level over a reasonable time;
5. consideration and approval of specific standards by each department or division of the medical staff to which the rules will apply;
6. initial and ongoing education of the entire medical staff concerning the scope and benefit of the rules; and,
7. periodic reevaluation of the scope of the rules in light of medical literature and the experience at the hospital.
   

       
[Image: Zipper _animated.gif, by DemonDeLuxe (Dominique Toussaint]


Hospitals and physicians share an interest in the hospitals' financial viability.  They also share an interest in maintaining facilities of the highest quality and providing the best patient care possible.  These interests are enough to unite them in confronting the overwhelming economic pressures facing hospitals and physicians today.  Through their cooperation, economic credentialing can become a positive force for change within hospitals. It can form the foundation for the successful hospital-medical staff relationship of the future.

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           [Image: Cliffs of Moher, Ireland, Photo by Tobias Helfrich, March 27, 2004]


          The range of conflicts arising within the healthcare industry that could benefit from the application of an alternative dispute resolution process is as broad as one’s imagination.  This is a partial list of the circumstances in which conflicts can arise and ADR can be used effectively.

• Contracts between hospitals, physicians and other providers for professional services  (conflicts arising in their formation, operation, renewal or termination)

• Contracts with vendors (conflicts arising in their formation, operation, renewal or termination)

• Joint venture agreements (conflicts arising in their formation, operation or termination)

• Medical staff relations (conflicts arising in interpretation or amendment of bylaws, inter-department issues or clinical policies)

• Medical staff privileges (conflicts arising in individual applications or disciplinary matters)

• Managed care agreements (conflicts arising in their formation, operation, renewal or termination)

• Disposition of financially distressed facilities (conflicts involving creditors, government regulators, staff and community)

• Inter-institutional affiliations, mergers and acquisitions (conflicts arising in their formation, operation or termination)

• Physician practice acquisitions (conflicts arising in their negotiation or unwinding)

• Governance matters (intra-corporate board conflicts, including conflicts concerning management  performance or bylaws revisions)

• Patient relations (conflicts arising in consent to treatment, quality of care, medical errors, billing and collection matters)

• Governmental regulation (conflicts arising in licensing, compliance or enforcement matters)

• Employment issues (conflicts arising in employee discipline or termination)

• Professional practices (conflicts arising in their formation, entry of new partners, withdrawal of partners, retirement or dissolution)

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          Completing the thought addressed in the two previous posts, there is a third reason why ADR works well in resolving healthcare industry disputes.



[Image: "Smeden og bageren". Illustration by Theodor Kittelsen for Johan Herman Wessel's poem]


Reason #3. 

          Parties to a healthcare dispute can especially benefit from ADR because the unique and complex subject matter of their conflict can be readily accommodated.  By selecting an ADR process and a neutral best suited to the conflict at hand, the parties move immediately into an efficient and productive mode of dispute resolution.  Resorting to traditional courtroom litigation often requires that a judge be educated on the parties’ business model, the world of healthcare finance and reimbursement, and a variety of legal constraints unique to the healthcare field.  Experience indicates that this is a difficult, time consuming and expensive process.  Although most judges are highly intelligent and capable, there is only so much time that can be devoted to each case.  Moreover, most judges sit in courts that handle cases of all varieties, in which healthcare cases are a relatively infrequent occurrence.

          By selecting an ADR neutral with substantive knowledge of the healthcare business and healthcare law, the parties achieve not only efficiency, but a much greater likelihood that they will obtain a result that is fair and mindful of both parties’ real interests.  Although the precise role of the neutral varies within the ADR process selected, the neutral can often help the parties and counsel better identify their interests and how they might mesh with those of the other party.  Where common ground is difficult to find, the neutral can help each party better understand all consequences of the proposals on the table, as well as those of “walking away”.  Sometimes, the neutral’s best value comes from affirming something a party has already heard from counsel, but better accepts with the neutral’s concurrence.  The credibility of the neutral as someone who truly understands the conflict just as well as the parties and their counsel is critical to achieving this result.

          Many examples of this advantage of ADR in healthcare can be imagined, but one may illustrate the point.  A hospital that has “exclusive” contracts with two medical groups to provide two different kinds of medical services at the hospital is faced with a dispute between the groups over which of them has the right to perform a new procedure, a dispute which quickly becomes a three way conflict involving the hospital.  Such “turf battles” are not unusual.  Aside from reviewing whatever the parties’ existing contracts say on the subject, the resolution of this conflict may require consideration of expert input on the impact of the outcome on patient care; the application of the hospital’s medical staff bylaws; provisions of existing managed care agreements;  Medicare reimbursement rules concerning permissible billing by the respective groups; state law and regulations governing hospital licensing and permitted scope of medical practice; and the resolution of other previous (or potential) “turf battles” at the same hospital.  Although the use of ADR in this case may not make all parties wildly happy, the neutral’s appropriate and timely attention to all of these factors will vastly improve the quality and fairness of the outcome.

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          Continuing the thread started in my last post, there are several reasons why ADR works especially well in the healthcare industry. 


[Image: Photo of Coins in the Trevi Fountain in Rome being collected at early morning, by Giovanni Dall'Orto, March 2005]


Reason #2. 

          The parties to a healthcare dispute often (although not always) have interests at stake other than money, or which cannot easily be reduced to a specific dollar demand.  Traditional courtroom litigation is designed primarily to determine which party to a dispute must pay the other party, and how much.  Although courts can grant “equitable relief”, essentially ordering one party to do or stop doing something, that option is limited in scope and driven by the form of the prevailing party’s plea for relief.  In contrast, ADR processes embrace the notion that flexible solutions, tailored to the parties’ unique interests, offer  the best outcome to any dispute.

          An example of this advantage of ADR would be a dispute between a hospital and a medical group over the interpretation of the group’s contract to provide certain medical services at the hospital.  The dispute could involve any number of issues important to both parties, but could easily place the parties in a situation where the contract seemingly must be terminated, and one side will then sue the other for breach of contract.  Neither party in such case really wants to sue the other for money damages, nor do they want the disruption to patient care and hospital services that would accompany protracted litigation.  Courtroom litigation in such case will ultimately assure that the parties’ legal rights are determined and enforced, but it will also create the negative collateral effects that come from using too dull and heavy a tool.  The use of ADR processes in such a case would provide the parties with options and alternatives from which to jointly reach a workable solution.

          Other examples of this advantage of ADR would be disputes over the medical staff privileges to be granted by a hospital to a physician or other practitioner; conflicts between a hospital and its medical staff concerning the interpretation or amendment of the medical staff’s bylaws; disputes within the board of trustees of a health system concerning the system’s mission, or the performance of management; and disputes among providers concerning quality of care or patient access issues.  Although financial considerations may be important in all these disputes, in none of them does either party seek a payment of money.  ADR processes, as determined by the parties, could be focused immediately upon what the parties in such cases really care about. 

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          Alternative dispute resolution (or “ADR”) is increasingly being used to resolve conflicts arising in all facets of society.  The chief benefits of ADR (cost savings, faster results, confidentiality, and the parties’ control of the process) have been well established.  ADR is particularly appropriate for use in the healthcare industry for several additional reasons, the first of which is described today:


[Image: Table 10 from Gilbert Beckett, A Comic History of Rome  c. 1850, Cicero denouncing Cataline]


Reason #1. 

          The parties to a healthcare dispute often have some interest in (or need for) a continuing relationship after the current dispute is resolved.  By its nature, traditional litigation is an adversarial and combative process.  The objective of each party’s counsel is to crush the other party’s case, and in the process, the other party is often hurt as well (if not destroyed).  In contrast, although ADR involves advocacy of both sides of the conflict, the parties have jointly committed to a process of their choosing to reach a fair result that both will accept.  The likelihood of a viable relationship after resolution of the dispute is thus vastly improved.

          Examples of this advantage of ADR could occur with respect to the relationships between a hospital and members of its medical staff; partners to a healthcare joint venture; members of a professional practice; health providers and their patients; and health insurers and health providers. Because the need for healthcare services continues to grow, and there are a limited number of established participants in the delivery of (and payment for) those services, there is a significant incentive in many disputes for both parties to put their conflict behind them.

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[Image: Musher Thomas Knolmayer at the Willow, Alaska start point of the 2005 Iditarod sled dog race, Photo by Tech. Sgt. Keith Brown]


          With this post, I start my first blog and what I think is the only blog site devoted to the topic of alternative dispute resolution in the healthcare industry.   As stated above on the masthead, I intend to blog at the intersection of ADR and healthcare law.  Both of these topics are well covered separately elsewhere (see links and blogs in sidebar), and I will try not to duplicate those efforts. 

          To make this site most useful, and to bring some order to my thoughts, I am dividing the world of ADR For The Healthcare Industry into topics that make sense to consider separately.  In alphabetical order, this blog will discuss alternative dispute resolution in the context of:

Commercial Healthcare Disputes

End of Life and Treatment Decisions

Healthcare Arbitration

Healthcare Mediation

Healthcare Regulatory Actions

Hospitals, Physicians and Medical Staffs

Managed Care Payment and Coverage Issues

Medical Malpractice Claims

These topics will overlap, and undoubtedly will subdivide and recombine over time.  But this is where I will start.  Let me know what you think.

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